Kruse Kronicletag:typepad.com,2003:weblog-1914012017-11-21T12:20:10-06:00contemplating the intersection of work, the global economy, and Christian missionTypePadWorld Social Indicators: Global Per Capita Incometag:typepad.com,2003:post-6a00d83451b14d69e201bb09d40baa970d2017-11-21T12:20:10-06:002017-11-21T12:20:10-06:00We have seen that life expectancy has been improving all across the planet. It is one of the most important measures of well-being. Yet most people think of income when they think of prosperity. Rightly so. Income is correlated with...Michael W. Kruse

We have seen that life expectancy has been improving all across the planet. It is one of the most important measures of well-being. Yet most people think of income when they think of prosperity. Rightly so. Income is correlated with other factors that allow us to move beyond surviving to thriving.

The common refrain we hear today is “The rich are getting richer and the poor are getting poorer." It is widely repeated. It is a sentiment that often finds its way into the unison prayers of confession in congregations of my tradition. N. T. Wright, a theologian whose work I’ve found very helpful, writes:

And now we have the new global evils: rampant, uncaring, and irresponsible materialism and capitalism on the one hand; raging unthinking religious fundamentalism on the other. As one famous book puts it, we have ‘Jihad versus McWorld.” (Whether there is such a thing as caring capitalism, or for that matter thoughtful fundamentalism, isn’t the point at the moment.) …. It doesn’t take a Ph.D in macroeconomics to know that if the rich are getting richer by the minute, and the poor poorer, there is something badly wrong. (Simply Christian, 8)

It also doesn’t take a Ph.D. in macroeconomics to verify such claims either. ;-) The truth is much more complicated than this declaration and certainly is not true if we take the long view of multiple generations. What can we say about per capita income on an historic basis?

Comparing income across eras is difficult. Inflation and other variables make direct comparison impossible. Furthermore, comparing contemporary currency-based economies to barter economies will not do. Economic historians have developed a concept called “purchasing power parity” (PPP) to aid in this process. The value of a dollar at a fixed point in time is chosen and the value of income at all other points in time is pegged to the purchasing power of the fixed dollar. For our purposes, we will be using a PPP measure of “2011 International Dollars” (I$). Annual per capita Gross Domestic Product (the total market value of all final goods and services produced within a given country in a given period of time, usually a year) will be used as a proxy for income.

Not all economists agree on how to achieve parity between the present and more distant eras. Angus Maddison, one of the foremost authorities on this topic, suggested that about I$1,000 per capita (using 2011 dollars) is a subsistence level of income and was typical of subsistence living prior to the industrial revolution. However, economist Brad Delong, who has done his own analysis, claims:

“A large proportion of our high standard of living today derives not just from our ability to more cheaply and productively manufacture the commodities of 1800, but from our ability to manufacture whole new types of commodities, some of which do a better job of meeting needs that we knew we had back in 1800, and some of which meet needs that were unimagined back in 1800.” (Brad DeLong)

Therefore, DeLong puts historic subsistence living at a lower level, but both scholars end up with similar income estimates in recent eras. Here is the change over the last 2,000 years using Maddison's estimates.

The following chart shows their estimates between 1700 and 2015:

You can see that the growth accelerates beginning in the early nineteenth century. Many have suggested that the industrial revolution began not long after 1750 and it is true that many inventions came into being not long after that time. However, there was a lag time of a few decades between the advent of various technologies and the placement of them into productive use. Maddison argues for a beginning point of 1820 (as do other economic historians.) Whichever the case, keep in mind that the world population grew more than sixfold from less than 1 billion to more than 6.6 billion from 1750 to 2000 during this explosion in per capita income.

So in the aggregate, we can see that growth in worldwide per capita income is astounding. But how broadly spread is the economic expansion?